Have the Greeks Done Us a Favor?
"Do not trust the horse, Trojans. Whatever it is, I fear the Greeks even when they bring gifts."
Virgil's Aeneid, Book 2, 19 BC
Now let me start by saying that, unlike Virgil, I have absolutely nothing against the Greek people. In fact I think this current chapter in their rich history offers us a valuable lesson into the impact of democracy — another Greek gift — in action.
Even before Greece joined into the euro in 2001, there were questions about the underlying health of its economy.
The country struggled to deliver the opening fiscal requirement that euro zone countries should have a budget deficit no greater than 3 percent of GDP .
And there are many tales of assets like the Greek railways turning debt into equity, which the government bought, to create a financial transaction rather than a loss.
In fact the borrowing to cover the deficit gap—which was forecast to actually be running at over 8 percent versus the 3 percent target—is what started this situation. Who would have forecast that the public debt-to-GDP ratio would end up at 165 percent in 2011?
That said, leaders exerted their democratic right and invited Greece to enter the euro zone (and more significantly, stay under the same terms as all other member states). So let’s also say that Greece’s decline within the euro shouldn’t be put down purely to State mis-management but was rather a shared accident waiting to happen.
We should partly blame ourselves for believing that all euro member states were created equal and could be managed under common fiscal (but not politically-binding) terms.
We exacerbated the problem by driving up Greece’s ongoing balance of trade deficit (since approximately 65 percent of their exports are to EU member states). To fund this deficit, we—non-Greek governments and private individuals—also own over 70 percent of Greece’s staggering €350 billion debt book
So let’s say for a minute that the Greeks have done us all a big favor. How?
Well, at least it was "only" Greece — the 15th largest economy of the 27 states in the European Union (by GDP per capita), whose primary exports are agricultural goods, textiles, steel and cement, all of which can be substituted early on; which represents 0.5 percent of global GDP and 1 percent of global debt. Imagine if it had been Spain or Italy?
The euro crisis has forced the debate only a decade after the launch of the euro rather than playing out an extended death-spiral over 20, 50 or 100 years (Remember that the Greek’s last currency, the drachma, lasted 170 years in its most recent incarnation).
What should we do with this unwelcome—but not wholly unexpected—"gift' from Greece? From the perspective of an entrepreneurial, market-focussed individual sitting on the edge of the euro zone, here are my suggestions (borrowing heavily from “what did the Greeks ever give to us?”):
- A sense of historical perspective — Greeks gifted us with the disciplines of history, philosophy and political science, so lets stop the blame game and view our current situation as “history in the making” — and this time we can positively influence how the story ends up
- Scientific enquiry process — The Greeks positively invented causal analysis, so rather than just blaming them for this current mess lets use it to explain the issues with our own economic models and how other troubled economies should best navigate their way through impending crisis
- Common language and vocabulary — Greek culture gave us an alphabet and literacy, so lets use this Euro experience to speak with a common language and deliver a clear message on global debt challenges
- The blend of art and science — One thing the Greeks know about better than most is that life isn’t all fact-based scientific argument or alternatively passion-filled artistic ones, but the ability to successfully blend both together to create a rich tapestry. Both sides are needed to explain a situation and draw people together around shared interests.
So let’s not just blame the Greeks for bringing us this gift. However next time we should make sure to unwrap the gift and explore it carefully before we bring it in to our own house.
Robert Diamond is an entrepreneur based in the U.K. and U.S. whose specialty lies in unlocking the commercial potential of customer data. Diamond is non-executive Chairman of emnos — a leading global retail analysis and decision-support company. He’s also operating partner for several private equity funds and founder of Fernbrook Partners, a seed investment vehicle focused on early-stage retail sector technologies.
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